Nations vow well-funded World Bank but no deal yet

Mon Oct 5, 2009 12:54pm GMT
By Lesley Wroughton
ISTANBUL (Reuters) - Global finance and development ministers on Monday promised to ensure that the World Bank had enough resources to fight poverty and other threats facing developing countries.
The International Monetary Fund and World Bank's Development Committee called on the Bank to provide member nations with an assessment of its capital needs in spring 2010 so they could decide how best to meet that goal.
The wording in the committee's communique after a meeting here of officials from around the globe appeared to be a compromise among rich donor nations over the need to refill the World Bank's crisis-depleted coffers.
The committee also backed a proposal by the Group of 20 development and emerging nations to shift voting power in the World Bank by at least 3 percent to developing countries to give them more say in the global institution.
The communique said it was important to "move towards equitable voting power in the World Bank over time."
World Bank lending to fast-growing developing countries has tripled since the global financial crisis started as the institution threw lifelines to governments facing a collapse in revenues and a sharp fall in private capital flows.
At the semiannual meeting, developing countries urged an early agreement on providing more money to the Bank.
CRISIS LENDING DEPLETES COFFERS
World Bank President Robert Zoellick has warned that the institution, the globe's main development lender, could face serious financing constraints by the middle of next year if demand for loans continues at the current pace.
The Bank has proposed a capital increase of between $3 billion to $5 billion for the International Bank for Reconstruction and Development, its lending arm for emerging and credit-worthy middle-income countries, ranging from China to Indonesia, Brazil, Mexico, Ukraine, Latvia and Nigeria.
"The least we can do at this stage is to agree to supporting a capital increase for IBRD," India's Finance Minister Pranab Mukherjee told the gathering.
U.S. Treasury Secretary Timothy Geithner said that the United States wanted to ensure multilateral development banks, such as the World Bank, have adequate resources. But he said any capital increase must be tied to reforms.
"We must be fully confident that additional capital for the MDBs' hard loan windows is needed and that any new resources will be managed well and used effectively," Geithner said.
He said a capital increase should go hand-in-hand with more transparency and accountability, and that the World Bank needed to ensure its programs are effective.
French Finance Minister Christine Lagarde said she did not believe the Bank needed fresh funds. "The (World Bank) has substantial resources at its disposal to assist its members, resources that are far from being depleted," she said.
Britain sounded a similar note, saying the institution should provide member countries with options for increasing lending using existing capital and resources.
In documents prepared for the meeting, the Bank laid out a number of ways its resources could be increased, including through a direct injection of capital from its members or by raising the amount it charges for its loans.
In addition, it could give member nations more voting power in the institution in exchange for higher contributions.